We recommend a buy in the stock of Gujarat Pipavav Port from a short-term perspective. It is seen from the charts of the stock that after encountering resistance at Rs 74 in early and late October, the stock reversed downwards and started to decline. This downtrend accelerated and in a short span of seven weeks the stock has plunged 32 per cent.
Though the stock's medium-term trend is down, its long-term support (February low) at Rs 49 cushioned the stock on Tuesday. After hitting an all-time low, the stock bounced up forming an inverted hammer candlestick pattern. It is a reversal pattern which signals that short sellers are starting to cover their positions. The stock is testing the lower boundary of the Bollinger bands indicating oversold position.
We observe that there is an increase in volumes over past three trading sessions. As the stock's daily and weekly indicators and oscillators are featuring in the oversold territory and the stock is reversing from key support, we take a contrarian stance on it for a short-term horizon. We expect the stock to move higher and touch our price target of Rs 52 or Rs 54 in the approaching trading sessions. Traders with short-term perspective can consider buying the stock with stop-loss at Rs 48.5.
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